Choosing FHA Lenders With No Overlays In California

Choosing Lenders In California With No Lender Overlays Is Difficult Due To Many High-Cost Areas

This Article Is About Choosing FHA Lenders With No Overlays In California

California has the most number of high-cost counties in the nation. The average California home price is double the national average home of $330,000. Therefore, a large percentage of home mortgages in California are high-balance loans. Most lenders have lender overlays on high-balance FHA, VA, and conventional loans. High-balance loans are loans that exceed the traditional FHA and Conforming loan limits. In this article, we will discuss and cover choosing FHA lenders with no overlays in California. Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays on government and conventional loans. We are licensed in California and a large percentage of our loans are high-balance loans.

California Home Prices 

What are the house prices in California

California has one of the largest states in the nation. California also has one of the highest housing prices in the U.S. Average home values in California are almost double the national average of $330,000. With more demand for housing than supply, prices of housing in California keep on increasing year after year. Many banks and lenders in California have overlays. Not all mortgage lenders have the same mortgage guidelines.

Overlays are mortgage guidelines imposed by lenders on top of the minimum lending guidelines by FHA, VA, USDA, FANNIE MAE, AND FREDDIE MAC.

  • With FHA Loans, HUD sets guidelines with regards to minimum mortgage loan requirements
  • In order for HUD to insure defaulted FHA Loans, lenders need to meet HUD Guidelines

In this article, we will cover and discuss qualifying with a lender with no overlays.

Minimum FHA Guidelines

For example here are minimum FHA minimum lending guidelines:

Minimum credit scores of 580 for 3.5% down payment home purchase loan. Maximum debt to income ratios for borrowers with 620 credit scores or higher is 56.9% to get AUS Approval. Debt to income ratios of borrowers under 620 credit scores is 43% to get an approve/eligible per Automated Underwriting System Findings. 100% of the down payment can be gifted.

FHA Lenders With No Overlays In California On Collection & Charge Offs

Unpaid collection accounts are okay as long as the aggregate amount is under $2,000. If unpaid collection accounts are over $2,000, then 5% of the unpaid collection balance will be used to calculate the borrower’s debt to income ratios. The borrower does not have to make any payments, but 5% of the unpaid debt is just used for income qualification purposes in the event if the unpaid collection account turns into a judgment. Medical collections are exempt.

Judgments And Tax Liens

What are judgments and tax liens

Judgments And Tax Liens:

Tax Liens are acceptable on FHA loans. This only holds true as long as the borrower has a written payment agreement with the Internal Revenue Service. Three months of canceled checks and/or bank statements need to be provided on FHA loans. You can qualify for a conventional loan with outstanding tax debts. However, you cannot have an outstanding tax lien. You can owe the IRS tax debts but need to enter into a written payment agreement and make one payment per the monthly payment agreement prior to closing. You can qualify for a mortgage with outstanding judgments. You need to have a written payment agreement with the judgment creditor and make three timely monthly payments.

Examples Of Mortgage Lender Overlays

California home buyers who are told they do not qualify for a home loan may not qualify due to overlays and not because they do not qualify for a home loan in California. Most California mortgage companies have overlays more so than lenders in other states.

Again, overlays are additional guidelines set by the individual lenders that are beyond the minimum overlays set by government agencies such as:

  • FHA
  • VA
  • USDA

Typical Lender Overlays By California FHA Lenders

Most lenders have lender overlays. Overlays are additional lending requirements that are above and beyond the minimum agency mortgage guidelines of HUD, VA, USDA, Fannie Mae, Freddie Mac. FHA loans minimum credit score requirements are 580 credit scores for a 3.5% down payment FHA loans. Many California lenders have credit score overlays where their minimum credit score requirement for FHA loans may be 640. Some are higher while others can do FHA loans with 620. A California mortgage lender with no overlays on FHA Loans only requires a credit score of 580 scores. Maximum debt to income ratios for FHA lenders with no overlays is 56.9% for borrowers with 620 credit scores or higher. However, many California FHA mortgage lenders have a debt to income ratios overlays where the maximum debt-to-income ratios are capped at 45%. Some California FHA mortgage lenders with debt to income ratio overlays will go up to 50% debt to income ratios. California borrowers with high debt to income ratios need to choose a California mortgage lender with no overlays on debt to income ratios that can get up to a 56.9% debt to income ratio for an AUS approval. Paying off unpaid collection accounts is not required per FHA lending guidelines. However, many California mortgage lenders will not qualify any mortgage applicants with outstanding collection accounts until all collection accounts have been paid off. Borrowers with outstanding unpaid collection accounts need to Choose a California mortgage lender with no overlays on unpaid collection accounts.

Qualifying For A Mortgage With Outstanding Judgments

Which means qualifying for a mortgage with valid judgments


  • HUD does not require you to pay off judgment in full
  • HUD will allow you to enter into a written payment plan with a judgment creditor
  • As long as the judgment debtor has been making at least three payments and can show three canceled checks, they will qualify for an FHA loan

Many California mortgage lenders have overlays on judgments where judgment debtors need to have the judgment paid off in full before qualifying for a California FHA loan.

FHA Lenders With No Overlays In California

Home Buyers who are looking for direct FHA lenders with no overlays in California can contact us at Gustan Cho Associates at Loan Cabin Inc.  We are a no overlay California mortgage lender that specializes in FHA Loans, VA Loans, USDA Loans, and Conventional loans.  All of our loan programs in California do not have any lender overlays. We just go off DU FINDINGS and/or LP FINDINGS.  Our team of licensed mortgage loan originators is licensed in California and is available 7 days a week to issue pre-approvals.  Please contact us at Gustan Cho Associates at or call us at 262-716-8151 or text us for a faster response.  Over 75% of our borrowers are home loan applicants who were told they do not qualify due to their lender overlays.  We specialize in home loans with bad credit in California.  If you are seeking FHA lenders with no overlays in California, contact us today.

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